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Social preferences and skill segregation

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  • Antonio Cabrales
  • Antoni Calvó

Abstract

This paper shows that models where preferences of individuals depend not only on their allocations, but also on the well-being of other persons, can produce both large and testable effects. We study the allocation of workers with heterogeneous productivities to firms. We show that even small deviations from purely “selfish” preferences leads to widespread workplace skill segregation. That is, workers of different abilities tend to work in di¤erent firms, as long as they care somewhat more about the utilities of workers who are “close”.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 629.

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Date of creation: Jul 2002
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Handle: RePEc:upf:upfgen:629

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Contract theory; mechanism design; envy; social preferences; skill segregation;

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References

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  1. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  2. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
  3. Benabou, Roland, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 619-52, August.
  4. Ernst Fehr & Klaus Schmidt, 2000. "Theories of Fairness and Reciprocity – Evidence and Economic Applications," CESifo Working Paper Series 403, CESifo Group Munich.
  5. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  6. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December.
  7. Saint-Paul, Gilles, 1999. "On the Distribution of Income and Worker Assignment under Intra-Firm Spillovers, with an Application to Ideas And Networks," CEPR Discussion Papers 2290, C.E.P.R. Discussion Papers.
  8. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  9. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  10. Fershtman, C. & Weiss, Y. & Hvide, H.K., 2001. "Status Concerns and the Organization of Work," Papers 2001-2, Tel Aviv.
  11. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  12. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
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Citations

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Cited by:
  1. Judith Hellerstein & David Neumark, 2005. "Workplace Segregation in the United States: Race, Ethnicity, and Skill," NBER Working Papers 11599, National Bureau of Economic Research, Inc.
  2. Luiz Dias Bahia & Danilo Coelho & Alexandre Messa Silva & Sergei Soares, 2009. "A Evolução da Segregação por Qualificação Profissional ao Nível das Firmas," Discussion Papers 1406, Instituto de Pesquisa Econômica Aplicada - IPEA.
  3. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  4. Cabrales, Antonio & Miniaci, Raffaele & Piovesan, Marco & Ponti, Giovanni, . "An experiment on markets and contracts : do social preferences determine corporate culture?," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/677, Universidad Carlos III de Madrid.
  5. Pedro Rey Biel, 2005. "Equilibrium Play and Best Response in Sequential Constant Sum Games," Experimental 0506004, EconWPA.

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